Napster: Investment Group Vows Proxy Fight

By Eric Savitz

Three investors have disclosed in a lengthy filing with the SEC that they play to stage a proxy fight for three Napster (NAPS) board seats. The trio includes Perry Rod, who describes himself as an independent investor and president of Market Rap LLC, a company developing an investor community site, as well as chairman of The Paradise Project, “a non-profit religious organization;” Thomas Sailors, of investment firm Cloverdale Investments, and a former managing director at Bank of America Securities; and Kavan Singh, who owns 10 Cold Stone Creamery franchises and other business interests.

Where’s Carl Icahn when you need him?

The trio makes some interesting points, which boils down to the fact that Napster trades at a market cap of $70.7 million, or almost exactly the amount of cash on its balance sheet. In other words, the market ascribes zero value to Napster’s business. “We believe this discrepancy is a result of negative sentiment surrounding almost all music content businesses due to the unresolved effects of piracy, but also due to a lack of confidence in the way the company is governed,” they write in their SEC filing. They point out that in May 2007, CBS paid $280 million for LastFM; the investors contend Napster “may hold considerably more value.”

The three men together hold 648,100 Napster shares, or about a 1.4% stake.

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.